JPMorgan Calls Stock Selloff Overdone, Forecasting Year-End Rebound Led by Cyclicals and Semis

JPMorgan equity strategists led by Mislav Matejka argue that the recent stock market pullback has pushed sentiment into overly bearish territory, creating conditions for an equity rebound into year-end despite benchmark Treasury yields hovering near multi-decade highs.
The bank’s contrarian thesis is anchored in several core factors:
• Oversold conditions: Both equities and sovereign bonds are registering near-oversold readings. With Fed funds futures already pricing in over three additional rate hikes, expectations have stabilized even as the 10-year Treasury yield holds around 5.2%.
• Earnings resilience: Heading into Q3 reporting season, JPMorgan expects corporate earnings revisions to remain broadly positive across key regions.
• Macro stability: European business activity has improved, marked by the Eurozone Composite PMI climbing to 53.1 and Germany's Ifo Business Climate index rising to 89.9.
• Sector allocation: Rather than signaling a structural bear market, the bank views the yield-driven unwind of crowded momentum trades as a constructive positioning reset. Strategists favor cyclicals—including financials, industrials, and commodities—alongside semiconductors and hyperscalers, while maintaining caution on richly valued AI software and services.